SEPARATION AGREEMENT AND RELEASE

Exhibit 99.1

SEPARATION AGREEMENT AND RELEASE

     This Separation Agreement and Release (the “Agreement”) is made and entered into as of November 17, 2006 (the “Effective Date”) by and between HCC Insurance Holdings, Inc. (“HCC” or the “Company”) and Christopher L. Martin (“Martin”).

RECITALS

     Martin is the Executive Vice President and General Counsel of the Company. Other than this Agreement, Martin and the Company are parties to the following, and only the following, agreements (collectively, the “Ancillary Agreements”):

     Under the Stock Option Agreements listed above in Agreement Recital paragraphs c.-p., the Company has granted options to purchase shares of the Company’s common stock (“Common Stock”) in favor of Martin. Each “Grant” and a description of the options that Martin has exercised, what rights to purchase fully vested shares exist, and what shares have not yet vested are described in the attached Exhibit C to this Agreement, the Options and Awards Summary. Exhibit C is incorporated in this Agreement by reference.

     Under each of the Indemnification Agreement, Article IX of the Restated Certificate of Incorporation of HCC Insurance Holdings, Inc., as amended (the “Charter Indemnification”) and Article VIII, “Indemnification of Officers and Directors,” of the Bylaws of Insurance Holdings, Inc. (the “Bylaw Indemnification”) (collectively, the “Existing Indemnification Arrangements”) the Company is obligated, under certain circumstances, to indemnify Martin under the terms and conditions therein stated. Notwithstanding any provision of this Agreement to the contrary, the Existing Indemnification Arrangements shall remain in effect and be enforceable accordance with their respective terms and conditions, except as expressly modified or supplemented by this Agreement.

     On the terms hereinafter set forth, the parties agree that Martin’s status as an officer and employee of the Company and each of its subsidiaries is terminated as of the Effective Date.

     The parties agree that the Agreement recitals are true and accurate, and that Martin does not occupy any offices or have rights to acquire, directly or indirectly, any Common Stock or options to purchase Common Stock of HCC, except as set forth in the Agreement Recitals and as modified by this Agreement.

AGREEMENT TERMS

     Therefore, in consideration of the promises and mutual agreements set forth in this Agreement, the receipt and sufficiency of which is hereby acknowledged by all parties, the Company and Martin agree as follows:

     1.  Termination of Other Agreements. As of the Effective Date, the Employment Agreement between Martin and the Company listed in Agreement Recital a. is cancelled and

terminated and will be of no further force or effect. The Existing Indemnification Arrangements shall remain binding and enforceable as between the parties in accordance with their terms. Therefore, Martin agrees and acknowledges that any rights he may have to any payments, benefits, or other perquisites of any kind whatsoever under the Employment Agreement including, without limitation, compensation, salary, use of or ownership interest in company automobiles, use of or ownership interest in company airplanes, country club dues, vacation and sick pay, and travel and car allowances, are extinguished by this Agreement and Martin’s right to any claim or cause of action whatsoever to reimbursement, payments, benefits, or other perquisites under the Employment Agreement are released and forever waived under Agreement paragraph 8. The Company will cooperate with Martin to effect transfer of Martin’s existing disability and life insurance policies to him provided that Martin reimburses the Company for any pre-paid premiums. The Company will transfer to Martin ownership of the Houstonian Club membership used by Martin during his employment with the Company at no additional cost (except any lawful tax withholdings). Notwithstanding the foregoing, Martin shall be entitled to payment of (i) all accrued compensation through the Effective Date (excluding any bonus payments) and (ii) all unreimbursed expenses incurred through the Effective Date.

     2.  Severance . Contingent upon Martin’s compliance with each of the terms and conditions of this Agreement, the Company will pay Martin $285,000.00 minus all lawful tax withholdings (the “Payment”) in equal monthly installments for a period of twelve (12) months ( i.e ., $23,750.00 per month minus all lawful tax withholdings) beginning on the Effective Date. Martin understands and agrees that the Payment is in addition to anything of value to which Martin is already entitled to receive.

     3.  Vesting of Stock Options, Forfeiture and Effect on Grants. The parties agree that Martin will have no right to accelerated vesting of options to purchase Company stock (or other securities) that have not yet fully vested by the Effective Date, as described in the Grants listed in Exhibit C attached to this Agreement. As of the Effective Date, Martin agrees that he forfeits all rights to, and interest in, any then unvested stock options and such options shall be canceled and terminated on the Effective Date. Concerning the right to purchase shares that have fully vested, but have not been exercised, Martin understands and agrees that all vested options not exercised within sixty (60) days of the Effective Date shall be forfeited and shall be canceled and terminated. Based on the Company’s determination with the concurrence of its independent auditors of the accurate grant date, Martin understands and acknowledges that the actual exercise price may differ from the exercise price set forth in his stock option agreements. Martin agrees that the Company’s determination with the concurrence of its independent auditors of the actual grant date and resulting exercise price shall be the price used to determine any gains or profits from Martin’s exercise of vested options and that his exercise price will be determined after taking into account the Company’s determination with the concurrence of its independent auditors of the actual grant date and resulting exercise price. Notwithstanding any provision in any Grants listed in Exhibit C, Martin shall not be subject to forfeiture of any option gain predicated on Martin engaging in a Competitive Business as defined in the respective Grants.

     4.  Resignation. Martin hereby irrevocably resigns all positions as an officer and employee of the Company as of the Effective Date and covenants not to seek employment thereafter with the Company or any subsidiary. Likewise, Martin resigns all positions as a director, officer or other representative of all Company subsidiaries, whether direct or indirect,

effective as of the Effective Date and covenants never to seek to be appointed or nominated as a director or officer of any Company subsidiary.

     5.  Reimbursement of Gain or Profit and Forfeiture. Regarding options that Martin has already exercised at any time, Martin agrees to reimburse the Company for all incremental gains or profits he received or obtained resulting from any difference between the exercise price that Martin exercised any options and the exercise price on the accurate grant date as determined by the Company with the concurrence of its independent auditors. Martin acknowledges and agrees that the Company shall be entitled to offset any amounts owed to him by the Company under this Agreement against the amount of any incremental gains, profits or other amounts which Martin may be entitled to based on any difference in stock option grant dates or exercise prices from those reflected in each Grant, as determined by the Company with the concurrence of its independent auditors, arising from stock options issued at any time to Martin. After the Company determines, with the concurrence of its independent auditors, the amount of gain or profit from the exercise of his options, Martin will, within thirty (30) days after receiving written notice of the amount owed to the Company accompanied by a statement showing the computation of the amount owed, including the nature and amount of each adjustment to each option exercise by Martin comprising the total adjustment, pay the full amount owed to the Company or instruct the Company in writing to offset such amount against the amounts owed to Martin hereunder, or a combination of both methods of payments; provided however, if Martin fails to pay the full amount or provide written instructions with regard to any such offset, the Company shall be entitled to exercise immediately its right of offset against any amounts owed to Martin under this Agreement or the Existing Indemnification Arrangements.

     6.  Medical and COBRA Benefits. The Company shall continue Martin’s medical, dental and vision benefits provided for in Section 3(d) of the Employment Agreement until May 1, 2007 (the “Benefit Termination Date”). At that time, Martin will be eligible to receive eighteen (18) months of continued medical, dental, and vision benefits through the Consolidated Omnibus Benefits Reconciliation Act (COBRA) if Martin makes a timely election for the payment of such benefits. Benefit continuation information through COBRA and an election form will be sent to Martin upon his qualification date. Contingent upon Martin’s compliance with each of the terms and conditions of this Agreement, the Company will pay the costs for Martin’s eighteen (18) months from the Benefit Termination Date of COBRA continuation coverage.

     7.  HCC Releasees . The “HCC Releasees” are defined as HCC Insurance Holdings, Inc., each of HCC subsidiaries and each of HCC and its subsidiaries predecessors, successors, parents, joint ventures, holding companies, subsidiaries, divisions, affiliates, assigns, partnerships, agents, directors, officers, employees, consultants, committees, employee benefit committees, fiduciaries, representatives, attorneys, and all persons and entities acting by, through, under or in concert or in any such capacity with any of them. Under this Agreement, Martin is excluded from the definition of “HCC Releasee”.

     8.  Global Release of Claims . Martin, on behalf of himself, his heirs, executors, successors and assigns, irrevocably and unconditionally releases, waives, and forever discharges HCC and the HCC Releasees, excluding Martin himself, from any and all claims, demands, actions, causes of action, costs, fees, attorneys’ fees, and all liability whatsoever, whether known

or unknown, fixed or contingent, which Martin has, had, or may have against HCC or any of the HCC Releasees, from the beginning of time and up to and including the date of execution of this Agreement other than as may exist, or hereafter arise, under this Agreement, the Ancillary Agreements, or the Existing Indemnification Arrangements, except as expressly modified or supplemented by this Agreement. This Agreement includes, without limitation, claims at law or equity or sounding in contract, express or implied (other than those arising under this Agreement, the Ancillary Agreements, or the Existing Indemnification Arrangements, except as expressly modified or supplemented by this Agreement), or in tort, claims arising under any federal, state, or local laws of any jurisdiction that prohibit age, sex, race, national origin, color, disability, religion, veteran, military status, sexual orientation, or any other form of discrimination, harassment, or retaliation (including, without limitation, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, Title VII of the 1964 Civil Rights Act, the Civil Rights Act of 1991, 42 U.S.C. § 1981, the Rehabilitation Act, the Family and Medical Leave Act, the Sarbanes-Oxley Act of 2002, the Employee Polygraph Protection Act, the Financial Institutions Reform, Recovery and Enforcement Act (or any other employment-related banking statute or regulation), the Uniformed Services Employment and Reemployment Rights Act of 1994, the Texas Commission on Human Rights Act, any federal, state, local or municipal whistleblower protection or anti-retaliation statute or ordinance, or any other federal, state, local, or municipal laws of any jurisdiction), claims arising under the Employee Retirement Income Security Act, or any other statutory or common law claims (other than those arising under this Agreement, the Ancillary Agreements, the Existing Indemnification Arrangements and those that Martin may have under